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What Are the CRA Debt Forgiveness Rules?

If you owe tax debt, and you’re not able to pay the amount that you owe, you might be wondering if there are any CRA debt forgiveness rules that will reduce the amount owing. In general, the CRA (Canada Revenue Agency) will not accept less than the full amount of tax debt owed to it by an individual. In the eyes of the CRA, this is money that is owed and it aims to collect this debt in full.

However, the CRA does have programs available where it may reduce or waive the interest and penalties on your debt, but not the actual debt itself.

In some circumstances, the CRA will provide taxpayer relief from penalties or interest. However, it will only do so in the following situations:

Extreme financial hardship or inability to pay

If you can prove to the CRA that you are having significant financial struggles and that paying your tax debt would make it impossible for you to afford other life necessities (food, shelter, etc.) then the agency may consider reducing or eliminating penalties.

In these situations, the CRA will require full financial disclosure from you. This means you will need to give them all of the information on your income, your spouse’s income, your household expenses, where you bank, your assets, and potentially even more details. Once the CRA has this information, it may determine that debt owed to it is the top priority (over your other debts, such as credit card debt) and require that you pay them before your other creditors. This can seriously hurt your credit rating and cost you a lot of money.

Actions of the CRA that have made it extremely difficult or impossible to pay on time

This includes processing delays, errors in CRA information, errors in processing, and other delays

Extraordinary circumstances

This includes situations such as floods, fires, natural disasters, serious illnesses or accidents, civil disturbances, and more.

Other circumstances

The CRA may consider taxpayer relief in circumstances other than the ones listed here

As you can see, taxpayer relief provisions and CRA debt forgiveness rules are very strict. If you wish to apply, you should speak with a professional. Our team can give you the best chance of your application being accepted. Contact us today.

Canada Revenue Agency Payment Plans

As you can see, the debt forgiveness rules CRA has in place are very stringent. If you are unable to pay your tax debt in full, another option may be to arrange a payment plan with the CRA.

However, much like with the taxpayer relief provisions listed above, the CRA will require full financial disclosure from you before it will agree to a payment schedule. This can be very complicated and can significantly affect your financial life.

For instance, once you provide the CRA with full details of your finances, it may determine that you are paying “too much” on your non-tax debt each month. It may then structure a payment plan in a way that requires you to pay only the minimum balance on your credit cards (for example) and then pay the rest of your money to the CRA. While this will get your tax debt paid more quickly, it will also cost you A LOT of money in credit card interest.

If you have come looking for details on CRA debt forgiveness rules, and have considered negotiating a payment plan to pay off your tax debt, speak to a professional first. The CRA can be very difficult to negotiate with, especially if you owe a lot of money, and even harder to deal with if you’ve already provided the agency with full financial disclosure. Before you do this, contact our team. We have the experience needed to give you the best chance at a successful CRA negotiation.

Farber Tax Solutions Helps You at Every Step of the Way including:

1| Organizing: We analyze all documents and communication, to fight the CRA on your behalf

2| Audits: We assist you with audits and ensure proper conduct by tax authorities

3| Appeals: We can prepare a Notice of Objection, clarifying your standing with the CRA

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Farber Tax Solutions is a tax dispute resolution firm serving clients across Canada. Our team of ex-CRA professionals at Farber Tax Solutions provide effective tax solutions and the tax lawyers from our affiliate: Farber Tax Law, ensure that you get high-quality litigation services and legal advice. This ensures that you get holistic and robust tax solutions. We have built our reputation on outstanding client service and are committed to helping you succeed in your tax matter.

*Farber Tax Law is an independent law firm affiliated with Farber Tax Solutions in Ontario, Canada **Past results are not necessarily indicative of future results and the amount recovered will vary according to the facts in individual cases.